Dealing with a VAT windfall

ASK THE AVERAGE business owner what his ideal situation would be as far as tax is concerned and he would probably say that it would be to get a big rebate from the VAT people.
In reality there are many occasions when businesses receive large rebates for overpaid VAT; for example when a product has been treated as standard rated instead of zero rated. But no business can celebrate this rebate until the very delicate issue of unjust enrichment is fully considered. Unfortunately many taxpayers are left very disappointed when those two important words have been taken into account.

Basic principle

The basic principle of unjust enrichment is that no taxable person should make a financial gain from making VAT errors. In effect if any VAT rebate is paid by HMRC the key question to ask is whether the rebate belongs to the...